Trade Risk Prevention Under Air Pportation Mode

In June 1999, an export company in Zhejiang reached an export contract with a India importer for a total amount of more than 60 thousand US dollars. The terms of trade stipulated in the contract were CFR NEW DELHI BY AIR, and the payment was 100% irrevocable letter of credit at sight. The shipment date was from August 1999 to Shanghai by air.

After the contract was concluded, the importer opened a letter of credit on time by a commercial bank in India. The notifying bank and the negotiating bank were all domestic banks. The terms of the letter of credit were "CNF NEW DELHI", and the exporters did not care much about it at that time.

After they have received the letter of credit, they have dispatched the goods according to the stipulations, and have prepared the documents required by the letter of credit and negotiated the formalities.

However, the domestic negotiating bank received a notice of refusal from the issuing bank shortly after sending the relevant documents to the India issuing bank. The reason for the refusal of payment was inconsistent with the document: the price term "CFR NEW DELHI" on the commercial invoice was not in line with the "CNF NEW DELHI" in the letter of credit.

After hearing the news, the exporter immediately contacted the importer to ask for payment, and at the same time sent a telex through the domestic negotiating bank to the issuing bank to declare that the discrepancy was not established and required the other party to fulfill its obligation of reimbursement in accordance with the provisions of UCP500.

But the importer and the issuing bank ignore this. In this case, the exporter immediately contacted the cargo carrier. His freight forwarder in New Delhi informed the goods that the goods had already been taken away by the consignee.

In such a passive situation, the exporter had to agree to the request that the other party cut the price by 20% as the final solution to the problem.

From the above cases, we can see that the root cause of the exporter's passive situation is the loss of the right to goods.

The exporter's loss of goods right before payment is due to the characteristics of AIR WAYBILL.

As we all know, the biggest advantage of a letter of credit is bank credit guarantee. Although the bank deals only with documents, it does not ask the specific circumstances of the goods.

If the buyer fails to pay the redemption order, he will not be able to get the goods, which can be realized in the sea way, because the bill of lading is the certificate of title, and the buyer can only pick up the bill of lading from the bank by way of the bill of lading from the bank.

Air waybill under the air pport mode, the air waybill does not have the characteristics of the document of title, it is only the pport contract concluded between the air carrier and the shipper and the receipt of the goods received by the carrier or his agent.

Because the time of air pportation is very short, usually the goods are delivered to the destination before the consignor passes the air waybill to the consignee, so the consignee can pick up the goods with the arrival notice of the carrier and the relevant identity certificate.

In this way, even if the letter of credit is used as a means of settlement, it is not very safe for sellers.

However, in practice, we often encounter the situation of air pportation, for example, some perishable goods, fresh goods, seasonal goods and high value and low volume commodities.

How to guard against the risk of letter of credit under the air pportation mode, I think the following measures are taken: 1.

比如要求買方在出貨前預先電匯一定比例的貨款，以分散風險；　二、嚴格審查進口商的資信情況，包括財務狀況、經營狀況、付款記錄等，以核定其信用額度，決定合同金額的大小；　三、嚴格審查開證行的資信情況，以免出現開證行故意找出“不符點”拒付，使買方不付款提貨，造成錢、貨兩空的局面，必要時可要求對信用證加具保兌；　四、如果貨物金額太大，可要求分批交貨；　五、要求將航空運單的收貨人做成“憑開證行/償付行指示”（TO ORDER OR TO THE ORDER OF THE ISSUING/REIMBURSING BANK）；　六、嚴格認真地根據信用證制作單據，做到“單單一致，單證相符”，在單據方面不給對方造成任何的可乘之機。

We also request the negotiating bank to cooperate closely. When the issuing bank / reimbursing bank has a change, we must argue with the other party and act in strict accordance with the UCP500 and other relevant international practices, and safeguard our legitimate rights and interests. Seven, insurance export credit insurance.

Export credit insurance is to protect the loss caused by the commercial risks and / or political risks of foreign importers to their exporters; eight, to maintain close contact with the air carriers and their agents at the destination, because before the consignee has taken the goods, if the exporter is aware of any change, the exporter / shipper has the right to request the air carrier to return, or change the consignee, or change the destination.